So should I deduce from your post that you work at Bear Stearns - in a non-trading capacity - and that this board is the closest you've come to trading?
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Job with Morgan Stanley???
- Thread starter lasner
- Start date
Quote from segv:
Lasner,
You were not asking for trading advice in this thread, but I wanted to chime in with the others to say that a blowup is inevitable with uncontrolled risk. Yes, the probabilities are in your favor, and you can win on 95% of trades or better. The 1% catastrophe will wipe you out, and maybe more. Point the gun at your foot, not your head.
That being said, no (reputable) option prop firm will allow you to trade this kind of strategy. Proprietary firms that specialize in options typically focus on market-making, and they hold limited risk option portfolios as a consequence of this activity.
-segv
I think the key is to not let that blow up occur when the price of my option doubles I get out. I won't allow the option to blow up in my face by holding on to it.
Quote from FaderTrader:
So should I deduce from your post that you work at Bear Stearns - in a non-trading capacity - and that this board is the closest you've come to trading?
Fader--
good god i hope he's not upstairs on the 5th floor with that spelling.. Ace would be very disappointed :eek:
Quote from FaderTrader:
So should I deduce from your post that you work at Bear Stearns - in a non-trading capacity - and that this board is the closest you've come to trading?
I didn't take either offer. I started at MASH. Concerning daytrading for my own account in 00 and lost enough in 05 to understand that trading on limited capital is a losing game (both times were for passive income), now it's strictly buy and hold.
I rarely make a post relating to trading on ET, after all any 20 something who works at a prop firm considers himself an expert and knows it all anyway. I mostly make posts for rec when Im bored online. From time to time I will post aboout something I have EXPERIENCED to try to help another, but they can take it with a grain of salt.
Didn't mean to offend you by pointing out youre fifth grade mistake that you repeated in the same post. I will bet that you will now propperly spell "weird" so at least you learned something.
Meant to say I made money in 00. Oops, and properly.
Lasner,
I will try to highlight the risk:
You assumption here is that you will be able to exit the position if the price of the option doubles. Under everyday trading circumstances that may very well be true. However, markets are not always rational environments. The market can explode against you, never giving you the opportunity to liquidate or hedge until well past the point no return.
This is not a diversifiable risk, Lasner, because of the extreme leverage. The probability of experiencing a catastrophic event increases as you trade more markets. P(A or B) = (P(A) + P(B)) â P(A and B). Further, even for the diversifiable portion of the risk, have you considered the correlation and cointegration between the markets in question?
Casinos do not take on unlimited risk. They have table limits and fixed payouts to protect them. Shorting premium is a perfectly viable strategy, it is the bread and butter of many traders. However, you have to understand and control the risk associated with being short premium. In regard to your current strategy, they call it "naked" for a reason.
-segv
I will try to highlight the risk:
Quote from lasner:
I use a 200% exit strategy. If the option doubles I get out ...
You assumption here is that you will be able to exit the position if the price of the option doubles. Under everyday trading circumstances that may very well be true. However, markets are not always rational environments. The market can explode against you, never giving you the opportunity to liquidate or hedge until well past the point no return.
...and I never put all my money into one market. I spread out among 4-5 different markets
This is not a diversifiable risk, Lasner, because of the extreme leverage. The probability of experiencing a catastrophic event increases as you trade more markets. P(A or B) = (P(A) + P(B)) â P(A and B). Further, even for the diversifiable portion of the risk, have you considered the correlation and cointegration between the markets in question?
I just feel this is the best way to trade. You're basically acting like the casino and writing bets on long shots.
Casinos do not take on unlimited risk. They have table limits and fixed payouts to protect them. Shorting premium is a perfectly viable strategy, it is the bread and butter of many traders. However, you have to understand and control the risk associated with being short premium. In regard to your current strategy, they call it "naked" for a reason.
-segv
Quote from segv:
This is not a diversifiable risk, Lasner, because of the extreme leverage. The probability of experiencing a catastrophic event increases as you trade more markets. P(A or B) = (P(A) + P(B)) â P(A and B). Further, even for the diversifiable portion of the risk, have you considered the correlation and cointegration between the markets in question?
I thought the same thing at first (and it's true), but if he sells calls on enough different underlyings (that are completely uncorrelated, which is unlikely), then although it is more likely that one of them will blow up, the premium he makes on all those that expire out-of-the-money will more than make up for the loss on the one black swan.
Quote from DynamicReplic8r:
I thought the same thing at first (and it's true), but if he sells calls on enough different underlyings (that are completely uncorrelated, which is unlikely), then although it is more likely that one of them will blow up, the premium he makes on all those that expire out-of-the-money will more than make up for the loss on the one black swan.
That scenario depends on the size of the event in question, the correlation/cointegration of the markets in question, et cetera. It is well worth it to buy the wings, or even ratio the wings and have a profit in these scenarios.
-segv
But wouldn't you agree that shorting premium WAY OUTSIDE OF THE MONEY is safer than trading futures contracts.Quote from segv:
Lasner,
I will try to highlight the risk:
You assumption here is that you will be able to exit the position if the price of the option doubles. Under everyday trading circumstances that may very well be true. However, markets are not always rational environments. The market can explode against you, never giving you the opportunity to liquidate or hedge until well past the point no return.
This is not a diversifiable risk, Lasner, because of the extreme leverage. The probability of experiencing a catastrophic event increases as you trade more markets. P(A or B) = (P(A) + P(B)) â P(A and B). Further, even for the diversifiable portion of the risk, have you considered the correlation and cointegration between the markets in question?
Casinos do not take on unlimited risk. They have table limits and fixed payouts to protect them. Shorting premium is a perfectly viable strategy, it is the bread and butter of many traders. However, you have to understand and control the risk associated with being short premium. In regard to your current strategy, they call it "naked" for a reason.
-segv
Take my example that I gave about silver. I sold july $17 calls for $150 when the price of silver was at $9.75 about three weeks ago. The third day after I sold my options in silver jumped 40 cents at the end of the trading day. I would have been crushed on the futures contract but was fine on my options. My options went from $150 to $200. Remember I'm talking about options that are way outside of the money, not options at the money.
You have a HUGE cushion that lies between you and the price. I feel the key is to not allow the option to run up in price. If there are any large moves against me I'm ready to exit. The key is to not let the option get rolling into some serious money, which very rarely happens.
I've known guys that this has happened to but kept thinking the market was going to change and they held on to their options. They got wiped out because of it.
it's unlikely you will get a job on a trading desk without a top degree from a top institution or without knowing someone. you should at least try though and be persistent. just sending out resumes isn't going to get you anywhere, and i like the idea of calling twice a day for a week. i used to just show up at people's offices to drop off my resume and see if someone would talk to me. it worked sometimes, other times it didn't. this obviously would not work with goldman sachs, jp morgan, morgan stanley, etc. but it can work for more entreprenuerial firms.
you have 20k. you should learn how to progam and go the prop route. you can make as much as you want and you can't put a price on being your own boss. i could never work for someone again.
you have 20k. you should learn how to progam and go the prop route. you can make as much as you want and you can't put a price on being your own boss. i could never work for someone again.